Last chance for tax efficient employee reward scheme

There has been an upturn in interest from local companies seeking to set up a tax efficient employee share option scheme while they still can.

The enterprise management incentive (EMI) scheme provides businesses with a tax efficient way of rewarding senior managers with share options. When the Finance Act is implemented later this year, the scheme will no longer be open to companies with 250 employees or more. Currently, most qualifying trading companies with gross assets worth less than £30 million can set up an EMI scheme, no matter how many people they employ.

As well as limiting access to the scheme to companies with less than 250 employees, the value of share options that can be granted per employee under the scheme has increased from £100,000 to £120,000 from 6 April.

Rupert Hutton, share plans expert at PricewaterhouseCoopers LLP in the Midlands, said:

“Over the past decade, the EMI scheme has become very popular with business owners as a means of rewarding high-performing senior managers. Under the scheme, employees receive share options, which when realised are taxable as a capital gain at 18%.  This compares very well to the rate of tax payable on an equivalent cash bonus. 

“In a few months, employers will no longer be able to set up new EMI schemes if they have 250 employees or more, although existing awards will be unaffected. Therefore, larger companies only have a small window of opportunity to set up an EMI scheme to reward their employees for delivering business growth before it’s too late.”

By setting up an EMI scheme now, while they still can, employers with more than 250 employees can pay out more reward, with a lower tax liability.

Contact details
Email: Rupert Hutton
Tel: +44 (0)121 265 5520